Williams-Sonoma sees profits fall, sales climb

San Francisco — With stockpiles and costs both climbing higher, first-quarter profits at Williams-Sonoma Inc. fell by 12.8 percent, even though sales climbed higher at a double-digit pace, rising by 12.2 percent.

Earnings came in far better than the company had earlier cautioned Wall Street to expect, helped by stronger sales in its catalog business. Fully diluted earnings of $0.11 per share came in sharply above the company's earlier forecast of an $0.08 per-share profit.

Sales at the diversified retailer rose by 12.2 percent, to $536.8 million from $478. 4 million last year.

But acting as a drag on the bottom line, inventories rose by 47.5 percent, to $372.5 million from $252.5 million during the same period a year ago, an increase of $120 million, as the retailer improved its in-stock position on core merchandise in the Williams-Sonoma, Pottery Barn and Pottery Barn Kids brands in a drive to improve customer service and sales.

Running ahead of the 12.2 percent gain in sales, costs increased by 16.7 percent, to $182.8 million from $156.7 million. As a percentage of sales, costs climbed higher by 130 basis points, or 1.3 percentage points, to 34.1 percent from 32.8 percent a year ago.